Bressler Risk Blog

Dear Ethics Lawyer writes: “Conflict with Unnamed Class Members” —

• “Q: Dear Ethics Lawyer, I am defending a putative class action for one of our firm’s largest business clients. Plaintiff’s counsel frequently files class actions and has at least four of them, that I am aware of, against clients of our firm. The class described in the suit I am defending is quite broad, which gave me an idea. After looking into it, I believe that at least two of our clients who are currently being sued by plaintiff’s firms in other matters would be within the class described in the matter I am defending. It seems to me that this places plaintiff’s counsel adverse to their own class members. Doesn’t this create a conflict under Rule 1.7 for which I could seek their disqualification?”
• “A: As I often write in this column, you should check authorities in your applicable jurisdiction, but Model Rule 1.7 appears to address this situation in defining who the lawyer’s client is in the context of class actions. Comment 25 to Rule 1.7 provides:”
  • “When a lawyer represents or seeks to represent a class of plaintiffs or defendants in a class-action lawsuit, unnamed members of the class are ordinarily not considered to be clients of the lawyer for purposes of applying paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get the consent of such a person before representing a client suing the person in an unrelated matter. Similarly, a lawyer seeking to represent an opponent in a class action does not typically need the consent of an unnamed member of the class whom the lawyer represents in an unrelated matter.”
• “In your situation, the fact that plaintiff’s counsel in your case is adverse to unnamed class members in other matters does not (at least without more) create a conflict for them.”
• “The situation would be different if a named class representative was adverse to their counsel. It could also be different if there were facts creating a material limitation conflict under Rule 1.7(a)(2) concerning plaintiff’s counsel’s representation of the class while being adverse to one of the unnamed class members in other matter(s), e.g., possibly arising from any centrality of the unnamed class member in proof or defense of the allegations in the suit.”
• “Similarly, although perhaps unlikely, you should also consider whether your defense of the class action creates any issues (material limitation conflict or otherwise) with your representation of other firm clients whom you know to be members of the class.”

“Weil Gotshal’s Closest Relationship Cost the Firm Everything” —

• “At Weil Gotshal & Manges, there was no relationship more important than that between Mike Aiello, its highest paid partner and most prodigious business generator, and Barry Wolf, its longtime executive partner. Their story is the story of Weil’s final decade. Their relationship dictated the firm’s strategy and decisions. It decided who stayed at the firm and who left. And when it shattered, the firm did too.”
• “Interviews with more than a dozen people, most of whom held leadership positions at Weil, point out how the complex relationship between Wolf and Aiello—and key misunderstandings between the pair—set the stage for the firm’s implosion within weeks of Aiello’s announced departure to Cravath. The sources were allowed to speak without being identified in order to describe a dynamic that many of them are still grappling to process. Some described being asked in recent days whether Weil’s fall shocked them.”
• “Weil had been falling behind its competitors gradually but consistently over the almost two decades that Wolf and Aiello practiced together. Its revenue growth was half the annualized rate of its competitors from 2008 to 2025, according to data from The American Lawyer and Citi’s law firm banking group.”
• “But Aiello’s status as the firm’s largest business generator meant firm leaders were unwilling to part ways with him—even as he became a source of contention at board meetings over his unwillingness to invest in new practice areas. That meant the task of dealing with Aiello fell to Wolf—the man Aiello pledged his loyalty to for so long.”
• “The pair were bound in many ways, including a provision Wolf negotiated when he became the firm’s leader that he would always be paid the same as the firm’s highest paid partner. In recent years, that was Aiello. That dynamic complicated people’s view of their relationship and their respective jobs—Wolf’s only role was to run the firm; Aiello was tasked with client matters.”
• “As Wolf became preoccupied with managing Aiello, the law firm that was proud to be glued together by a family dynamic stumbled and tripped headfirst into a commercial-minded business model adopted by rivals who devoured it. It is nearly impossible to answer the inevitable question: Did Wolf fail at his job, or did Aiello neutralize effectively the only boss he ever had?”
• “‘I’d hate to admit that parts of that are true, but we were largely partners and people felt a certain allegiance to a certain degree,’ one former partner said. ‘And that came a little bit from Barry and Mike.'”
• “Partner loyalty to Weil carried a cost and the firm didn’t pay as well as some of its closest rivals. Its partners earned more than $5 million on average last year, lower than the $8 million to $10 million at competitors. Still, many partners were happy with the trade for quite some time, even as the industry grew to be defined by lateral jumping between firms.”
• “Aiello and Wolf were somewhat ill-suited for those recruiting wars, viewing the business through their lens of loyalty. Why would you hire a partner who was proving their disloyalty by leaving their firm? “
• “Instead, they focused on bringing back lawyers who had left Weil once before. They were proving how special Weil was by returning. Wolf called Aiello ‘the original boomerang.’ He had returned to Weil at Wolf’s urging amid Dewey’s merger talks with Orrick in 2008, a move that the American Lawyer reported contemporaneously was a key factor in those discussions’ failure.”
• “Aiello disliked lateral partner hiring so much that when a rival firm recruited a handful of its lawyers, a powerful partner at that firm was told Aiello was trying to get his phone number. The partner believed Aiello was going to dress him down, even if the call never came in the end. Standard business practice when losing a partner in Big Law is to shrug and say, ‘Best of luck in your future endeavors.'”
• “‘There is a humane side to both of them,’ said one former partner. ‘But the lesson to me is humans are not perfect. We’re all imperfect. We all have our faults. And we have to forgive each other.'”
• “The run on the bank at Weil was perverse in the sense that it was started by some of the firm’s highest paid partners and its harshest impacts will be felt by its most vulnerable employees. And that’s true. But the wealthiest members of the firm, by virtue of their own success that the firm relied upon, had the closest proximity to the Wolf-Aiello alliance, to where they may have understood it in ways that differed even from the two men themselves. Many of them seemed to sense it would be the firm’s demise. Some had predicted it for years.”
  “As of September, the two seemed to still have a misunderstanding whether Aiello had agreed to stay on past Wolf’s retirement. Sources familiar with the matter say the two spoke on Sept. 8. Wolf was asking Aiello to commit to staying as the firm recovered from recent departures. It is unclear the two men came to an understanding.”
  “What is known is that on Sept. 10, Aiello’s team walked into Wolf’s office and submitted their resignations, including on Aiello’s behalf. Their breakup wasn’t face-to-face. It was over text.”
• “Aiello chose Cravath, one reason being that it was willing to take his entire team, a display of the personal loyalty some saw as the best in him. Still, others viewed his decision as an ultimate betrayal.”
• “The timing couldn’t have been worse. Coupled with the major departures from the firm’s private equity practice, Weil’s PE service capabilities by the time Aiello quit were severely diminished. Neither of the top lawyers at two of the firm’s most important clients have responded to questions about whether they would have kept working with Weil, though there are rumors they would not.”

Joseph Tiano opines: “Law Firms Must Re-Engineer AI Use to Prevent Unauthorized Actions” —

• “As I read the news this weekend, I’m coming around to the view that the next-generation AI problem for law firms won’t be a hallucinated answer or an unverified court filing. It will be a capable tool that took an action nobody approved. Firms need to start thinking about this now.”
• “Two incidents from this week’s news show how general AI risks in other scenarios may translate over to the law firm context.”
• “Incident one. During testing, Claude was running example tasks on randomly selected webpages. It landed on PhillyUnsolvedMurders.com and filled out a form suggesting it had information about an unsolved murder. Police say the submission was marked as spam and never reached investigators. Apparently Anthropic reported the incident”
• “Incident two. In a report Friday, Anthropic disclosed that another model submitted forms to an undisclosed government website when it was supposed to stop before submitting. Anthropic calls this agent persistence.”
• “The failures differ, but they share a gap: no human approved the specific action. In the first, nothing limited where the agent could act. In the second, a stop-point existed and the agent went past it.”
• “AI didn’t create this gap. It exposed it. Today, if the duties of competence, diligence and supervision are followed, a lawyer is usually the last step before anything is filed or sent, so most firms never had to define anything beyond the final human approver control. Agents remove that step by default.”
• “Law firms have three options:”
  • “1. Resist. Ban agents, and watch shadow use appear anyway.”
  • “2. Patch. Issue a policy memo. (just like outside counsel guidelines, such a memo is a hopeful control at best.)”
  • “3. Re-engineer. Scope what each tool can reach, require human approval at the final step, and log every action.”
• Only the third option really holds up. Bans get routed around, and memos can’t be enforced particularly well.”
• “To re-engineer, I think it starts with an analysis of existing data pools: billing data, LPM data and DMs data where you can break each service into workflows by task and phase. Then map where an agent can act on its own and where it must stop for approval.”

Tiano also offers some compliance and risk management advice in another post: “California Regulates Lawyers Use of AI: Self Regulation, Delegation, and Liability Concerns” —

• “California just regulated how lawyers use AI. It’s well intended, but it raises a question I can’t stop asking as a legal ethics guy: what happened to lawyers regulating themselves? Was ABA Formal Opinion 512, our own guidance on generative AI, structurally inadequate?”
• “SB 574 takes effect January 1, 2027. Hundreds of decisions have sanctioned lawyers for hallucinated citations, so I understand the impulse. But SB 574 asks lawyers to meet standards the statute never defines, and the profession was not asked to define them. “
• “Lawyers may use AI ‘to assist in the practice of law’ but may not ‘delegate’ it. I kinda get the difference but the line is undefined, and so is the term it depends on. ‘Practice of law’ has never had a clean definition. Unauthorized practice of law (UPL) rules vary by state, courts often decide case by case, and the definition has long been murky at the edges: document preparation, legal information versus legal advice, and now software that drafts and analyzes. If ‘practice of law’ means everything lawyers do, no AI drafting is allowed. If it means legal judgment, the statute should say so.”
• “None of the four duties in the statute has a stated remedy, and the statute creates no cause of action. The only express remedy, sanctions under § 128.7, covers the citation rule alone, runs to opposing parties, and deters rather than compensates. So if a lawyer violates the statute, what can a client assert? Malpractice? Breach of fiduciary duty? Is a violation negligence per se, evidence of the standard of care, or nothing? And what are the damages? A fake citation may impact a court more than the client. A confidentiality breach raises harder questions: what is the loss, and was privilege waived? The statute is also silent on the witnesses and victims whose addresses and phone numbers it protects. And this is just a knee jerk reaction I had. “
• “What I’d do: measure and monitor: Log which tool touched which task, who verified what, and who made the legal judgment call, then monitor those records over time. When duties come without defined liability, enforcement defaults to State Bar discipline, malpractice carriers, and clients.”
  “Right away, I’d pull billing records from ten recent matters and ask whether you could show, from your own records, where a lawyer exercised judgment and where AI assisted. If you can’t, that gap is your compliance risk.”

And for those intrigued by these future-forward and emerging issues, see this fascinating thought exercise: “Law Department 2.0: When Clients Take Control (Part II)” —

• “What happens when clients really have command of their data?”
• “Law firms are governed by Outside Counsel Guidelines (OCGs). In addition to billing guidance, OCGs increasingly focus on how work gets done and when automation is expected. What if clients directed more of the systems that law firms use?”
• “What if firms were required to perform certain work within a client-controlled research environment, perhaps by leveraging a client instance of a legal research service? The client could gain additional insights into how the work was done, including search strategies and the AI prompts used to approach the matter. That information could help with risk assessment and decision-making. It would also become part of the client’s institutional knowledge so future matters have greater context.”
• “The same could hold true for workflows defined by the client using its preferred AI platform, or legal operating system, as some vendors call their platforms. Think Claude for Enterprise, Harvey, Eudia, or other solutions.”
• “In the future, panel participants might be required to use a ‘legal operating system’ to complete work. “
• “In AI, a harness is the surrounding infrastructure that constrains and directs a model’s operation. Perhaps OCGs evolve into something resembling Outside Counsel Harnesses (OCHs), defining not just billing rules but the technology and processes that firms must use to perform the work.”
• “Matter information already travels with a lateral between firms to put the client first. Wouldn’t it make more sense for the matter information to just stay with the client in the first place?”
• “This may be jolting for law firms, and to be fair, there would be much to think through. There will be situations where a firm has proprietary know-how and shouldn’t expect to give it up. Complicated situations, such as multiparty litigation, would pose challenges too. To be clear, I’m not suggesting that all work becomes controlled by the client, but the seesaw may tilt more in that direction. “
• “The very expertise that clients rely upon may atrophy if firms can’t benefit from the knowledge gained on a matter, too. That’s not good for anyone. It’s also in clients’ interest for firms to retain their ability to specialize. “
• “In the future, clients will require firms to conform even more closely to their preferences regarding how work is completed.”

And when AI meets Time Entry: “Finally, A Way To Measure AI ROI: Be Careful What You Ask For” —

• “In case anyone wasn’t listening, Legora, the legal AI provider, and Laurel, a work intelligence platform provider, recently announced a ‘partnership.’ A partnership that reportedly has two main parts. It will offer what sounds like a fairly standard timekeeping tool. But it holds out the promise of an intriguing future tool that raises some possibilities.”
• “What Legora and Laurel are promising is to give law firm management the ability to determine the ROI on their purchase of Legora. The ROI for most AI platforms has indeed proven elusive, except for administrative and nonbillable work where AI replaces human work. I can only assume those trying to determine Legora’s ROI have faced the same difficulty. Hence the effort.”
• “The whole premise is that the AI will do work, perhaps much of which had previously been done by paralegals or associates. That’s billable work, and for firms that use the billable hour model, that’s hardly a return on investment. To the contrary, it’s a loss. Try explaining at the next partners’ meeting that you’ve just spent a ton of money on something that reduces their year-end shares. And be ready for the question: is it too late to back out of this deal? Time saved is not necessarily money earned.”
• “The Legora/Laurel partnership presumably will measure the time saved by Legora AI. Which is easily convertible to dollars. The question then becomes: What does a law firm do with those dollars? Does it pass them on to the client? And what if clients want to see those numbers?”
• “As in, ‘We want to see the savings your tools came up with so we can determine whether our bills reflect that reduction.’ What happens when the tool for justifying the technology investment becomes negotiating leverage for the client? Once you start measuring AI’s value, the next question is who gets to keep it.”

David Kluft asks: “Can my client instruct me not to share information within my firm?” —

• “A WY civil litigant with counsel decided to file a pro se motion for sanctions against her own lawyers. The litigant claimed she shared information with an associate at the firm, and that the associate breached confidentiality by sharing the information with others at the firm.”
• “The court cited to Comment 5 to the WY Rule 1.6: ‘Lawyers in a firm may, in the course of the firm’s practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers’ (ABA and many states have the same comment).”
• “Because there was no evidence the client had instructed the associate not to share the information (and for other reasons), the motion was denied.”
• Decision: here.

Yale Law Journal on: “Private Equity’s Law Firm Workaround: MSOs, Rule 5.4, and the Governance Gap” —

• “Private equity is moving aggressively into the legal sector, and the profession’s oversight infrastructure is wholly unprepared for this generational shift. To work around prohibitions against nonlawyer ownership, investors are repurposing the management-services organization (MSO): a split-entity model in which attorneys retain the regulated practice, but investors acquire the firm’s operating platform.”
• “This Essay provides the first systematic account of private-equity investment in law firms and the governance gap in which it is occurring—a vacuum unrecognized by the American Bar Association, state bars, or courts. The playbook is seasoned; the risks are not hypothetical. After pioneering the model with healthcare, private equity fundamentally reshaped accounting through hundreds of transactions in just a few years, with regulators scrambling only after the fact. Law is next.”
• “The MSO model rests on the fragile assumption that ‘business operations’ and ‘legal practice’ can be clearly and durably separated. Healthcare and accounting experience proves otherwise, with similar split structures consistently exhibiting formality erosion and investor ‘control creep’ through financial and operational pressure. Governance tensions run deep: the structurally conflicted MSO board must build value while policing its own influence over the interlinked law firm.”
• “The problem is not the MSO model per se, but the transactions proliferating in darkness without guardrails. This Essay proposes a three-part governance framework: (1) structural safeguards limiting MSOs to genuine support functions; (2) independent directors and a board ethics committee; and (3) ongoing compliance monitoring. The ultimate costs of the governance gap will fall on the public, not on investors. The window to act is closing fast.”

“Tennessee Supreme Court Rejects PE Law Firm Ownership” —

• “After considering potential updates to its rules on attorney licensing, the Supreme Court of Tennessee has announced that it will not be changing its regulations barring nonlawyers from ‘engag[ing] in the ‘practice of law’ or the ‘law business’ in Tennessee.’ “
• “The court received almost 400 comments in response to its request, according to the order. Those weighing in included lawyers, law firms, law schools and organizations including the Tennessee Board of Law Examiners, the Tennessee Access to Justice Commission, the Tennessee Bar Association, the Tennessee Attorney General, the Federal Trade Commission, the U.S. Attorney’s Office for the Middle District of Tennessee and the Council of the ABA Section of Legal Education and Admissions to the Bar, among others.”
• “‘From our perspective, the Tennessee order is a positive development,’ Attorneys’ Liability Assurance Society (ALAS) Senior Vice President of Loss Prevention Nesheba Kittling told Law.com in a phone call on Tuesday. ALAS was one of the organizations that submitted public comment to Tennessee’s high court.”
• “Kittling said that her organization is against private equity involvement in law firm ownership because ‘there are some lawyer liability risks associated with nonlawyer ownership of law firms,’ including ‘a downstream impact on lawyer independence, client service and adherence to the rules of professional conduct.'”
• “‘As lawyers, we have a unique relationship with our clients where client interests are supposed to supersede anything else, including profits,’ Kittling said. ‘The concern is that [by] introducing nonlawyer ownership, [including private equity], there may be an erosion of that, and there may be pressure to put profits over client interest and client service. For example, that could go to staffing, right? Is there pressure to decrease the amount of lawyers who are on a matter? And then does that decrease mean it impacts the client representation, which ultimately could lead to a malpractice claim?'”

Lawyer/Law Firm Impersonation Risk in the Age of TikTok: “TikTok Lawyers Face Their AI Clones” —

• “Documented found swarms of fake immigration attorney TikTok accounts and bots targeting immigrants in an analysis of tens of millions of posts.”

“Law firm Crowell faces disqualification bid in AI lawsuit” —

• “A fight over attorney loyalties has erupted in a lawsuit over the use of photographs to train AI technology, threatening law firm Crowell & Moring’s continued role in the case.”
• “Online art gallery DeviantArt asked a federal judge in Los Angeles on Wednesday to disqualify Crowell & Moring from representing automotive photography company Evox in the lawsuit, saying the firm previously advised defendant DeviantArt and its parent company on AI and other matters.”
• “DeviantArt said in a court filing, that Crowell advised its parent company Wix.com and its subsidiaries from 2022 through 2026 on AI litigation, AI regulation and copyright issues. The company said the firm also advised DeviantArt on its DreamUp AI image-generation service.”
• “‘Crowell’s conflict  is substantive, not merely technical,’ DeviantArt told the court. It said the firm’s prior work allowed it to acquire ‘material confidential information’ about the company.”
• Filing: here.

“Ex-Paul Weiss Client Can’t Pause Malpractice Suit Against Firm” —

• “Fairstead Capital Management’s malpractice suit against Paul Weiss for allegedly failing to disclose a conflict will continue rather than holding for an underlying appeal. Fairstead is represented simultaneously by Kasowitz and Skadden in different layers of the dispute.”
• “A former Paul, Weiss, Rifkind, Wharton & Garrison client who accused the law firm of failing to disclose a conflict in its representation cannot pause its malpractice lawsuit against its ex-counsel, a New York judge has ruled.”
• “Fairstead Capital Management’s motion to pause its case against Paul Weiss was denied by the Manhattan Supreme Court this month, despite its argument that a pending Delaware appeal for an underlying dispute could determine the scope of its New York legal malpractice case.”
• “The dispute between real estate investment firm Fairstead and Paul Weiss spans several court dockets in the two states. So far, more than half a dozen firms have entered the litigation across New York and Delaware, including Kasowitz LLP; Paul Weiss; Simpson Thacher & Bartlett; Skadden, Arps, Meagher, Slate & Flom; Quinn, Emanuel, Urquhart & Sullivan; Morris, Nichols, Arsht & Tunnel; and Ross Aronstam & Moritz.”
• “Fairstead originally retained Paul Weiss to advise it on removing two executives, William Blodgett and John Tatum, who allegedly sought to either take over Fairstead or alternatively create a new competitor.”
• “According to Fairstead’s legal malpractice complaint, Paul Weiss allegedly failed to disclose its ties to the influential Tisch/Sussman family, which both Blodgett and Tatum are linked to, and also allegedly gave the company poor advice, which led to a ruling against Fairstead in a Delaware suit over Tatum’s removal.”
• “That Delaware ruling is the one currently on appeal. As a result of the pending appeal, Fairstead sought to delay its New York case against Paul Weiss. Manhattan Supreme Court Justice Joel M. Cohen denied that stay on Friday and kept the parties to their already-agreed-upon briefing schedule for Paul Weiss’ pending motion to dismiss.”
• “Under that schedule, Fairstead must file any opposition to Paul Weiss’ dismissal motion by Friday, October 23. Paul Weiss then has until November 13 to reply.”

“Judge Finds No Conflict of Interest for Defense Attorney in 2016 Homicide Case” —

• “DC Superior Court Judge Todd Edelman allowed a defense attorney to remain on a murder case ahead of trial on Oct. 20.”
• “Wilbert Whitaker, 77, is charged with first-degree murder while armed and possession of a firearm during a crime of violence for his alleged involvement in the fatal shooting of Leo Hackett, 30, on April 30, 2016 at the 800 block of 21st Street, NE. Hackett died from a gunshot wound to his chest.”
• “Whitaker’s attorney, Nathaniel Mensah, began the hearing by explaining a potential conflict of interest that would necessitate his removal from the case if real. The conflict stemmed from Mensah previously working for a firm that represented the defense’s key witness, Whitaker’s wife. Mensah explained that while he currently does not currently know any information that could bias his relationship to the witness, he could not guarantee he won’t remember this information during the trial.”
• “After looking at caselaw, in specific Freeman v. United States, Judge Edelman ruled that there was no current conflict of interest, and Mensah should stay on as Whitaker’s lawyer. “
• “Judge Edelman said that if Mensah in the future did remember some information about the witness that would create a conflict of interest, he can withdraw from the case then.”

“Lawyer Charged With Insider Trading Wants to Subpoena Ex-Firms” —

• “A former Big Law attorney accused of feeding an insider trader ring with confidential client information signaled plans to subpoena the law firms he allegedly exploited.”
• “Nicolo Nourafchan filed a motion Wednesday in Massachusetts federal court to issue three subpoenas to law firms whose private client files he allegedly misappropriated from 2013 to 2023. Federal officials announced charges in May against Nourafchan along with 29 others for participating in a scheme to make trades based on private information about company transactions.”
• “Sidley Austin, Latham & Watkins, and Goodwin Procter may have to disclose their protocols for safeguarding client information, along with the specific material the former associate allegedly misappropriated to facilitate stock trades, should Nourafchan succeed with his motion.”
• “The demand hints that Nourafchan’s defense may seek to incorporate specific information about what records he allegedly accessed and when he accessed them. His lawyer Martin Weinberg also wants to review training for associates regarding their level of access to client files to which they aren’t assigned.”
• “‘The requested materials are necessary to refute the government’s inference that such access was undertaken to obtain confidential information for unlawful tipping,’ the motion states.”
• “His motion asks for legal authority to demand the law firms turn over client information allegedly used to trade stocks and the security protocols used to prevent unauthorized access. The motion also seeks to obtain the firms’ correspondence with federal law enforcement agencies investigating and prosecuting the insider trading defendants.”
• “‘The requested materials go directly to the government’s theory of the case,’ Weinberg wrote. ‘They will also show whether reviewing documents from unassigned matters was unusual or instead consistent with ordinary associate training, research, and drafting practices.'”
• “Weinberg went on to state that ‘because these issues bear directly on whether Mr. Nourafchan obtained and misused material nonpublic information as alleged, the defense requests production sufficiently in advance of trial to permit meaningful review and preparation.’ “

“US sanctions Greece-, Panama-based law firm over aid to Iranian shipping” —

• “The US Treasury Department imposed sanctions on Wednesday on Karnakis & Karnakis, a law firm based in Greece and Panama, saying it had for years provided legal assistance to Iranian shipping networks.”
• “The US Financial Crimes Enforcement Network also issued an administrative subpoena to advance an investigation into a Greek bank over potential ties to Iran, according to a Treasury statement, which did not name the bank.”
• “FINCEN also issued requests for information to six other European banks that it did not name over relationships with Iranian financial institutions under US sanctions. ‘Whether you are conducting illegal oil transfers at sea or sitting in the corner office of a law firm, if you are supporting the Iranian regime, we will find you and sanction you,’ Treasury Secretary Scott Bessent said in a release.”
• “State Department spokesman Tommy Pigott said Karnakis & Karnakis for years ‘set up shell companies to hide the true owners of vessels carrying Iranian oil, petrochemicals, and steel.’ He said the firm created companies that served as fronts for networks selling millions of barrels of Iranian oil to benefit the Islamic Revolutionary Guard Corps Quds Force and the Houthis. Karnakis & Karnakis did not immediately respond to a request for comment. Treasury also imposed sanctions on Singapore- and UAE-based shipping agents that it said directly aid Iranian shadow fleet operations.”
• See also: “Greece to impose sanctions on Iran-linked law firm, following US measures“

“Anthropic’s Ambitions in Legal Technology Get a Reality Check” —

• “It was billed as a ‘fireside chat,’ but law-firm innovation leaders had high hopes for a private meeting with Anthropic’s new head of Claude for Legal at a convention in Nashville, Tenn.”
• “The presentation from Robert Mahari — just a few weeks into his new role at Anthropic at the time — underscored to some law firms that the company, despite its industry-leading AI models and world-altering potential, is still just a 5-year old startup figuring out how to sell its products. It’s trying to enter a market where many lawyers have developed trust in AI products made by legacy platforms or startups like Harvey.”
• “‘They need to wake up,’ one of the people in the room said of Anthropic. ‘They do need to hear that we’re not impressed.'”
• “Forty-four percent of firms are using or exploring using Claude, tied with Thomson Reuters CoCounsel and trailing only Microsoft’s Copilot as the most popular AI tool among firms, according to a survey published last month by the International Legal Technology Association. But Anthropic hasn’t yet converted the high interest into long-term customers. Among the firms using or exploring Claude, just 7% said they had fully rolled it out to attorneys.”
• “All that colored how the law firm leaders received Mahari’s presentation, according to interviews with five people who attended the meeting and were granted anonymity to describe a closed-door discussion.”
• “‘It landed awkwardly in a room full of people who are trying to see if they can actually deploy Claude and are under pressure from their stakeholders,’ an attendee said.”
• “Law firms often negotiate some privacy and data security terms in their contracts with software vendors. Different firms have different risk tolerances, which they incorporate through negotiations with vendors.”
• “Anthropic, one meeting attendee said, is not far off the pace on the privacy terms it included in its base contracts. But he said his firm often negotiates privacy terms, and Anthropic isn’t willing to do that.”
• “Another meeting attendee said he balked at giving Claude access to email, because the system could then potentially access data from clients who don’t want their information in AI tools. The same person also took issue with Anthropic’s decision not to offer zero data retention policies for its Fable 5 model.”
• “Some firms have accepted Anthropic’s terms, deciding that Claude meets their safety standards. Ogletree Deakins has been running a pilot with Claude since February. Timothy Fox, the firm’s chief data and AI officer, said it has ownership over the data that goes into Claude and the answers it spits out.”
• “Despite the success, Fox said, ‘it is not a product that is geared for legal, and so they don’t design their enterprise security like a legal platform would. And so legal vendors are great because they know what a law firm is looking for.'”
  “He’s willing to be patient as Anthropic learns the industry and adds more functions for lawyers. Fox, like other innovation leaders interviewed for this story, said Anthropic was still in the early days of developing products for the legal industry, and that it had only recently attracted the attention of major firms.”
  “‘We give them some grace and some credit,’ he said.”
  “Anthropic is swaggering into the legal market as both top dog and underdog.”
  “As top dog, it has raised more than $100 billion, built an industry-leading reputation for Claude, and is eyeing a $2 trillion valuation in a forthcoming IPO planned for mid-November, Bloomberg News has reported.”
  “Those advantages were reflected in that private meeting in August, where innovation chiefs were excited that a company with Anthropic’s reputation is investing in legal work. Despite their misgivings about the meeting, some of the attendees who spoke with Bloomberg Law said they were still interested in paying for Claude—if it stands out from tools they’re already paying for.”
  “Some law firms use enterprise tools developed by Harvey or Legora alongside subscriptions to Claude or ChatGPT Enterprise that attorneys can use for quick queries. Whether firms believe they need both is an open question.”
• “‘The primary takeaway from that meeting was that unlike a lot of other legal tech vendors, there was a strong sense that we as an industry probably don’t rate significantly high on Anthropic’s universe of expected revenue, and therefore the level of attention that we would get as an industry is relatively low,’ one meeting attendee said.”
• “Bigger firms may have the resources to implement Claude themselves, but smaller firms lack the resources to do that, said Alex Finkel, chief innovation officer at Offit Kurman. Firms like his are looking for vendors that provide pre-built workflows, trainers and AI experts. Anthropic is still in the process of building that infrastructure, Finkel said.”

“9-Figure Lawsuit Alleges DLA Piper Committed Malpractice in Soccer Deals” —

• “A former DLA Piper client and multimillionaire sports investor is seeking hundreds of millions of dollars in damages from the law firm in a complaint that alleges malpractice in a series of European soccer club deals.”
• “Represented by McDonald Hopkins partner Alan Burger in Florida’s Fifteenth Judicial Circuit Court, John Textor claims that DLA Piper represented itself as Textor’s personal legal counsel despite negotiating contract terms that ultimately exposed Textor to losses he valued in the tens of millions.”
• “Williams & Connolly is representing DLA Piper, a firm spokesperson confirmed. In a statement, Williams & Connolly partner John Villa described Texter as a ‘very experienced and sophisticated businessman’ who knew the risks inherent to the deals.”
• “‘The well-publicized problems he and his companies have encountered had nothing to do with the quality of the lawyering, which was excellent in all respects,’ Villa said. ‘We are confident that DLA has fulfilled its professional responsibilities and will be vindicated here.'”
• “Per the complaint, which was surfaced by Law.com Radar, DLA Piper never suggested that Textor seek personal legal counsel as it simultaneously represented Eagle Football Holdings, a global football holding company chaired by Textor until March, when investor Ares Capital Corp. put the U.K. side of the company into administration.”
• “DLA Piper only sought a conflict waiver, the complaint stated, after performing and billing substantial work for Textor and Eagle Football Holdings, which purchased a 43% stake in Crystal Palace, a 90% stake in Brazilian club Botafogo, and a 77% stake French club Olympique Lyonnais between 2021 and 2022.”
• “The conflict waiver was addressed to Eagle Football Holdings rather than Textor personally, the complaint stated.”
• “As part of his Lyon purchase, DLA Piper shifted ‘enormous personal risk’ onto Textor in a put option agreement between Textor and Iconic Sports Eagle Investment by attaching Textor’s signature to a document that included revisions Textor hadn’t approved, a move Textor alleges cost him $90 million.”

“Private equity firm Charlesbank bets on US law firm in back office deal” —

• “Private equity firm Charlesbank Capital Partners has invested in the back-office operations of US insurance defense firm Wood Smith Henning & Berman, the law firm said on Monday, marking the latest influx of outside capital into the traditional legal market.”
• “Wood Smith Henning & Berman, a Los Angeles-based trial firm with more than 550 lawyers across 23 states, said it created a management services organization called WSHB Support Services that will provide non-legal operational infrastructure and support to the firm.”
• “Terms of the deal were not disclosed. the Financial Times previously reported that the transaction values the law firm at about $700 million. Charlesbank and Wood Smith Henning & Berman did not immediately respond to requests for comment on the valuation.”
• “The transaction is one of the most notable examples of investment in the legal industry through a management services organization (MSO), highlighting investors’ growing interest in the sector. Lawyers, consultants and other businesses are increasingly marketing their expertise in advising on such deals.”
• “Investors and others who are not lawyers are broadly prohibited from owning direct stakes in US law firms or sharing in attorney fees. The MSO model provides a vehicle for law firms to receive outside investments without breaching those professional rules. Outside investors can own or take stakes in the law firm’s non-legal, back-office operations through the MSO, which is paid through the firm’s revenues without any direct sharing of fees.”
• “Wood Smith Henning & Berman in a statement said it will remain an independent law firm with its lawyers ‘retaining sole authority over the practice of law and client matters.'”

Michael J. Epstein, managing partner of The Epstein Law Firm, writes: “The Most Important Question About a Law Firm MSO Isn’t Who Owns It. It’s Who Can Say No” —

• “There is an understandable tendency when lawyers talk about management services organizations, private equity and outside investment in the legal industry to start with the organizational chart. Who owns the law firm? Who owns the MSO? Are they separate companies? Where does the money go? Those are important questions, but I’m increasingly convinced they aren’t the most important ones.”
• “The question I would ask is much simpler: Who gets to say no?”
• “Imagine a law firm considering a major case. The lawyers believe in it. The liability theory is strong, the client has suffered a catastrophic injury, and pursuing the case properly may require hundreds of thousands of dollars in experts, depositions, testing and other litigation expenses. The business people looking at the same case may see something different. They see projected cost, time to resolution, capital tied up for several years and risk.”
• “Nothing about that is inherently sinister. A law firm is still a business, and lawyers have always had to make financial decisions. We pay salaries, rent, insurance and experts. We decide which cases to take. In contingency-fee practices, firms routinely spend substantial amounts of money on litigation without knowing whether they’ll ever recover it. But the analysis becomes more complicated when the lawyer making the professional judgment isn’t the only person with meaningful economic power over the firm.”
• “What happens if the lawyer says yes and the MSO says no?”
• “That, to me, is where this entire debate becomes real. New Jersey’s Rules of Professional Conduct have long protected the professional independence of lawyers. RPC 5.4 addresses fee sharing with nonlawyers and also prohibits a lawyer from allowing someone who employs or pays the lawyer to direct or regulate the lawyer’s professional judgment. The rule restricts arrangements in which nonlawyers have the right to direct or control a lawyer’s professional judgment.”
• “Suppose an MSO provides virtually everything a law firm needs to function: office space, employees, technology, marketing, accounting, intake systems, call centers, advertising, data analysis and perhaps even the financing that allows the firm to grow. The lawyers still technically own the law firm. Fine. But now ask who controls the budget, who decides whether another lawyer can be hired, who approves a major advertising campaign, who determines whether the firm can spend $250,000 developing a difficult case and who establishes the financial targets the lawyers are expected to hit.”
• “Then ask what happens when the lawyers say they need to do something that makes perfect sense professionally but makes very little sense on a spreadsheet this quarter.”
• “That is why I think we need to get beyond the comforting idea that ownership answers everything. Control can exist without ownership. Anyone who has ever run a business understands that. A landlord can exert leverage without owning your company. So can a lender. So can your biggest customer. So can the person who controls access to the thing your business cannot operate without.”
• “The same basic reality can exist in a law practice. If an outside entity controls enough of the infrastructure, financing, personnel or revenue flow, the formal answer to ‘Who owns the firm?’ may tell us much less than we think.”
• “Consider settlement decisions. The decision whether to accept a settlement ultimately belongs to the client after receiving the lawyer’s advice, but there are a hundred decisions leading up to that moment. Do we take another deposition? Do we retain another expert? Do we conduct additional testing? Do we reject an early offer and prepare for trial? Do we spend another $75,000 because we believe it will materially strengthen the case?”
• “Introduce a separate business entity with its own owners, return expectations, debt obligations or growth targets, however, and the incentives can become more complicated. Maybe the pressure is obvious. More likely, it isn’t. Nobody has to call the lawyer and say, ‘Settle this case because we want our money.’ Business pressure is usually more subtle than that.”
• “Budgets tighten. Certain cases become harder to fund. Hiring requests sit unanswered. Marketing dollars are allocated toward particular case types. Performance metrics begin shaping behavior. The firm’s economic priorities slowly become everyone’s priorities because that is how organizations work.”
• “None of this automatically means an ethical line has been crossed. That point matters. Law firms need vendors. They need technology. They need sophisticated marketing and financial management. Some firms desperately need better business systems. An MSO can potentially provide expertise lawyers don’t have and probably don’t want to develop themselves.”
• “And lawyers entering these arrangements should spend at least as much time thinking about what happens when everyone disagrees as they spend thinking about what happens while everyone is getting along. Contracts are easiest to live with when the firm is growing, revenue is up and everybody wants the same thing. The meaningful provisions are the ones that matter during conflict.”
• “Can the lawyer reject a business recommendation? Can the firm spend money on a case the MSO thinks is economically unattractive? Can lawyers refuse a marketing strategy they believe creates ethical problems? Can they change vendors? Can they hire the professionals they believe their clients need? Can they walk away from the management relationship without effectively destroying the practice?”
• “Those questions tell us much more about independence than a corporate diagram ever will. There is also another question lawyers should ask themselves: if saying no to the business side would cost the firm millions of dollars, access to its employees, its office, its marketing platform or perhaps its entire operating infrastructure, how independent is that ‘no’ in reality?”

“Dentons achieves global benchmark for protecting client information: ISO 27001” —

• “Dentons has achieved ISO 27001 certification for all operations across Australia and Papua New Guinea, reinforcing its commitment to protecting client information and maintaining the highest standards of information security, risk management and governance.”
• “ISO 27001 is the internationally recognised standard for information security management systems. Certification follows an independent external audit and confirms that Dentons’ information security, risk management and governance processes meet globally recognised requirements. The certification demonstrates that the firm has robust and repeatable controls in place to protect client and firm information, manage risk effectively and support continuous improvement.”
• “The achievement comes at a time when clients are placing increasing importance on information security, data protection and governance when selecting legal and professional services providers. ISO 27001 certification provides clients with additional assurance that Dentons’ information security practices have been independently assessed against a recognised international standard.”
• “Amber Warren, Australian Chair and Chief Executive Officer, Australasia, said, ‘Protecting our clients’ information is fundamental to the trust they place in us. Achieving ISO 27001 certification demonstrates our ongoing commitment to maintaining strong information security, governance and risk management practices across our operations.”
• “This certification provides independent validation of the controls and processes we have in place to safeguard information and supports our focus on delivering exceptional client service in an increasingly complex risk environment.'”
• “Maureen Migliazzo, Chief Operating Officer added, ‘This is an important milestone for our firm and reflects the dedication of teams across the business who work every day to protect information, manage risk and continuously improve our operations. It further strengthens our ability to support clients with confidence and meet evolving expectations around information security.'”
• “The certification complements Dentons’ broader information security and risk management framework and reflects the firm’s ongoing investment in systems, processes and people to help safeguard client and firm information.”